Circuits Split on NSR Trigger

Beveridge & Diamond, P.C., August 21, 2006

On August 17, 2006, the Seventh Circuit became the latest court to weigh in on how to determine whether a project has triggered review under the federal Prevention of Significant Deterioration/New Source Review (“NSR”) program. SeeUnited States v. Cinergy Corp., No. 06-1224 (Aug. 17, 2006). In an opinion by Judge Posner, the court upheld EPA’s claims that various projects undertaken by Cinergy Corporation had triggered NSR. The court expressly rejected Cinergy’s claim that the projects would not trigger NSR unless they increased the facility’s hourly emissions rate, finding this interpretation conflicted with the plain meaning of the regulatory language.

The Seventh Circuit’s decision is consistent with dicta in the D.C. Circuit’s decision in New York v. EPA, 413 F.3d 3 (D.C. Cir. 2005), but directly conflicts with the Fourth Circuit’s decision in United States v. Duke Energy Corp., 411 F.3d 539 (4th Cir. 2005). Judge Posner’s opinion strongly disagrees with the Fourth Circuit’s decision, both substantively and on procedural grounds; indeed, the opinion characterizes the Fourth Circuit as having “stepped out of bounds” by agreeing to hear a challenge to the validity of the regulations themselves, which Judge Posner notes is reserved to the D.C. Circuit. The Supreme Court has recently accepted certiorari on the Duke Energy decision, on precisely the same substantive and procedural arguments set forth in Judge Posner’s opinion. See www.bdlaw.com/news-news-55.html.

Interestingly, the Seventh Circuit’s decision was issued only three days after the District Court for the Northern District of Alabama reached precisely the opposite conclusion. SeeUnited States v. Alabama Power, Case No. 2:01-cv-00152-VEH (Memorandum Opinion, Aug. 14, 2006). That court had previously accepted the Duke Energy test as the controlling legal standard; on August 13, the court determined that, under that test, none of the projects that remained at issue had triggered NSR. The Alabama Power court further characterized the defendant’s arguments as “appropriate defensive arguments to an enforcement action,” noting that if these types of arguments cannot be raised except before the D.C. Circuit, then the Seventh Circuit itself had no jurisdiction in its seminal WEPCO v. Reilly decision.

For more information about the court decisions or NSR related issues, please contact Laura McAfee at lmcafee@bdlaw.com.